Grant Thornton’s UAE chief has ringside seat to the Gulf’s transformation

Illustration by Luis Grañena
Updated 13 October 2018
0

Grant Thornton’s UAE chief has ringside seat to the Gulf’s transformation

  • As UAE head of Grant Thornton, Hisham Farouk has had a ringside seat to some radical regional changes
  • ‘The region has witnessed material changes to what were key attributes of the Gulf countries’

DUBAI: Grant Thornton is riding just outside the leading pack of the Big Four accounting and consulting giants and, talking to the chief of its UAE business, Hisham Farouk, that’s exactly how the firm likes it.
While the Big Four — PwC, Deloitte, Ernst & Young and KPMG — have been getting increasingly embroiled in battles with regulators over perceived conflicts of interest and other abuses of the auditing system, the 40-year-old Grant Thornton (GT) is happy to leave them to it. In a calculated move, GT recently decided not to bid for any more audit contracts from the biggest firms in its native UK.
Farouk, born in Dubai but of Egyptian heritage, recently became the first Arab to hold a seat on GT’s global board of governors.
“We believe the expectation gap of what is expected by an audit firm and (where) our contractual, market and fiducial responsibilities lie has widened given the economic disparity across the world,” he said. “It is critical that professional service firms and regulators work hand-in-hand to define and agree what the new world-class requirements are and support the changes we are witnessing to create the new norm of economic balance, transparency and regulatory oversight.”
Nowhere is that “new norm of economic balance” more evident than in the Middle East, where GT has a growing business, from its base in the UAE but spreading increasingly to Saudi Arabia and Egypt, the three biggest economies in the region.
“The region is experiencing a very transformational time. The past few years have reshaped the economic and geopolitical landscape significantly. With the oil price recession ... and a significant shift of economic oil dependency, the region has witnessed material changes to what were key attributes of (the) ethos of Gulf countries,” Farouk said.
Such transformations include the removal of subsidies on energy, reviews of benefits structures in the public sector, the introduction of sales taxes, and a shift toward economies less dependent on oil and government spending.
“This has all created the volatility we have experienced over the past few years. GT is very excited about this transitional phase as we experience what the new norm will be like,” Farouk said.

Illustration by Luis Grañena
Illustration by Luis Grañena


Farouk has in the past underlined the potential for the UAE of the approaching Expo 2020 extravaganza. While some commentators think the economic “boom” associated with the Expo has been slow to have an impact, he thinks the real effect is still to come.
“You can surely see Dubai emerging into what it will be with the Museum of the Future, all the real estate developments like Dubai South and Dubai World Central airport. While we may have not witnessed the strength of the public relations effect of Expo yet, I suspect 2019 will be that year. Many expected the benefit to have been in the run-up years, yet we believe that Expo will be showcasing Dubai and the UAE to the world. It will attract a new caliber of companies and people and mark a new dawn for the nation’s presence in the global arena,” Farouk said.
His native Egypt will also benefit from the regional “feel-good factor” of Expo, Farouk thinks. “Watch and discover every opportunity Egypt has yet to offer. It is indeed not only a gateway to 100 million people, but an access point to Africa and the greater region,” he said.
GT has had a presence in Saudi Arabia for years, with offices in Riyadh, Jeddah and Alkhobar, working with corporates and with family offices — a mainstay of its business in the region — as well as being closely involved in one of the most high-profile business situations the Kingdom has experienced: The long-running standoff between the Al-Gosaibi family and entrepreneur Maan Al-Sanea.

The involvement in Saudi Arabia has given Farouk a ringside seat to the great transformation under way in the Kingdom. “Over the past two years, Saudi Arabia is undergoing a very radical pace of change relative to what the world has witnessed before from it. These changes are impacting the fundamentals of its social, economic and political fabric. None of this can be easy and we expect both challenges to be faced there, as well as opportunities,” he said.
Farouk believes that while there is still caution on the part of international investors considering involvement in the Vision 2030 transformation strategy, the fundamentals of the Saudi proposition will prove decisive in the long term.

“We have heard from the media that there is caution still and this is expected as the changes are major and you would expect some social and economic volatility from them. The fundamentals of Saudi Arabia still don’t change, given its population — which is characterized with relatively one of the largest youth populations — and the magnitude of the percentage of global oil production it controls. Globally, emerging markets have not had a strong year and this naturally reflects on Saudi Arabia as well,” he said.
Farouk believes that, with the right focus and leadership, the Vision 2030 goals are eminently achievable. “It will take a concerted effort from all stakeholders, including the public, and yes, I believe anything is achievable if there a sincere alignment between all parties involved. We have seen radical changes take place in Estonia, Rwanda, Singapore and Dubai, so anything is possible if there is clear focus and directive that benefits and prospers the people of the nation.”
Family offices — one of the great investment pools of capital in the Arab world — have traditionally been a focus for GT, and that will continue, even as regional economies are modernizing and their stock markets advertise the attractions of initial public offerings as a way to bring traditional businesses into the 21st century.
“Family offices are living through the changing times and many of them are pivoting to new sectors and services. It’s a critical time as they adjust to the new norm of the economy and market. IPOs have been in the forefront for many of them, and while market confidence is needed to revive capital markets in the region, it is important for many family offices to experience this transitional change prior to being ready for public offering and scrutiny,” Farouk said.
In any case, he believes, people are more important than stock markets or IPOs. “We must appreciate and take care of our people and be aligned with the visions and dreams of our clients. That is our true role in society. I am privileged to lead a team of highly proficient, sincere professionals that want to support the ever-changing world and work closely with our clients to fulfill their ambitions,” Farouk said.
“There are many discussions on how technology will change the face of this earth, but I am a true believer that it is people who create the future.”


Ahmed Al-Habtoor: Portrait of a driven auto executive

Updated 19 May 2019
0

Ahmed Al-Habtoor: Portrait of a driven auto executive

  • There is no country on this planet where you will see Bentleys, McLarens and Bugattis as much as in the UAE.

DUBAI: Over the course of a morning in his office in Deira, Dubai’s traditional business district, Ahmed Al-Habtoor talked eloquently and expertly about the motor business in the UAE and the Arabian Gulf, about customers’ likes and dislikes, about the tough times the industry has faced recently, about his best-selling models, and about the importance of the sector within the UAE economy.
Then, he dropped a small bombshell. He is always chauffeurdriven, and seldom gets behind the wheel of any of the luxury vehicles he trades daily. “I don’t care about driving cars, I care about selling them,” he revealed.
From the youthful chief executive officer of Al Habtoor Motors, who could have his pick of Bugattis, Bentleys, McLarens and other “fast boys toys,” that was quite a revelation.
“I don’t like driving, I like to be on my phone checking emails and messages. I don’t have the patience to look for parking, and anybody who can afford to have a driver should do so,” he added.
So Al-Habtoor is, in more senses than one, a driven executive. The motor division is a key part of the Al Habtoor conglomerate, started by his father, the group chairman Khalaf, in the 1970s as an engineering business but which has expanded through real estate, hotels and hospitality, to education and entertainment.
Motors has been an integral pillar of the Habtoor portfolio since it was set up in 1983 to handle the Mitsubishi franchise in the UAE. “We have strict corporate governance, law, a constitution in the company. The rules are set and we are here to implement the directions of the chairman. We have our own ideas, we try to be creative, but it is a well-established, solid company with very strong roots,” he said.
here is still a large number of workers — whom he called “partners” — who can date their employment back to the very beginning of the Mitsubishi franchise.
He admits to two alternative frustrations in his job, depending on the economic climate.
“When the market is active and business is fantastic, I get frustrated at the pressure of delivering to my clients. I’m just busy, trying to meet the expectation of delivering the right product at the right time,” he explained. “The other frustration is when the market is challenging and low, I’m busy trying to be busy, trying to find business. It’s all about being busy.”
For the past few years, the “challenging” market has been to the fore, as he candidly admitted. The fall in the oil price in 2014-15 began to affect the economies of the energy exporters of the Arabian Gulf toward the end of the following year, and the motor sector was seriously hit. Sales volumes declined sharply — compounded by government spending cuts and some policy decisions.
“I think in 2017 the volume was acceptable. In 2018, it dropped when the government implemented VAT. I don’t think VAT was the wrong decision, but it had a negative effect. It was implemented when the market was in a weak situation. If the market was booming, it would have been much easier for us,” he said.
Al Habtoor Motors’ longevity gives its CEO a perspective on the forces that shape the industry. “It’s a cycle. There is always a cycle every 6-8 years. When oil prices started to fall it had an effect. In our region, government spending is the key to moving the economy. Not only in Dubai, but the whole of the UAE.”
He estimated that the motor industry was the second biggest sector in the UAE’s non-oil economy, behind real estate, but saw no real linkage in the simultaneous downturns in property and motor sales.
The other factor that affected car sales — especially in the high volume and fleet car business — was the increasing reluctance of banks in the UAE to continue previous levels of finance to small and medium enterprises (SMEs) during the worst of the downturn.

“It was not a very wise decision to withdraw support from SMEs. The economy depends on large companies, but at the end of the day, consumption comes out of the (medium) and small businesses. Uncertainty and insecurity in the market made a lot of people stay away from buying,” he said.
Al-Habtoor estimated that car sales volumes in the fleet business were down by 50 percent from the highs of 2015, as they were across the whole of the volume motor business. “Last year was very challenging, but thankfully we managed all the challenges,” he said, on the back of an upturn in business measured across the whole of last year.
He has reason to be more optimistic in the current year. “There has been stimulus to the economy, Expo 2020, and the confidence in the market improved. The changes to visa arrangements, the reduction of license fees — all these are having an effect,” he said.
On the “Expo effect” — the expected boost to the UAE economy from the huge business fair planned for next autumn — he was cautiously positive. “We’ve seen that coming through already. Now it is nominal, but we are seeing green shoots. It is not a big effect yet but it is happening, and the more we go toward October next year the more benefit will come,” Al-Habtoor said, adding that he was confident of getting back to 2015 levels eventually.
That is good news for the Mitsubishi, Fuso, Jac and Chery marks that are Habtoor’s staple. But the group also has an impressive stable of luxury cars, with the dealerships for Bentley, the McLaren sports brand, and the super-car Bugatti, in the UAE
The UAE’s reputation for glamorous, extravagant cars — even down to the Dubai police fleet — is a global phenomenon, and Al-Habtoor does not think it will change any time soon, even in challenging economic circumstances.
“A lot of people want beautiful cars and the best. It always was like that, it still is now and it will be in the future. The UAE and Dubai is always about the best. It’s in the culture of the city. There is no country on this planet where you will see Bentleys, McLarens and Bugattis as much as in the UAE,” he said.
The economics are different in the luxury brands, which were not as badly hit by the oil-related slump as the volume business. “The luxury end was affected by the downturn, but it’s more resilient, it’s OK,” he said.
“In the first four months of this year, we’re the number one dealer in the world for Bentley, and have consistently been among the biggest Bentley dealers in the world, if not the biggest. When luxury goods are moving, not just cars, but jewelry and other things, I feel that the economy will come back soon,” he said.
Bentley sales have been given a boost by the introduction at the end of last year of a new Continental GT, and by the continued appeal of the Bentayga, the company’s first move into the SUV market, which has huge appeal for motorists in the region. Deliberately priced at below 1 million dirhams ($272,250), the luxury SUV aims to take on other upmarket four-wheel-drive vehicles.
He seemed especially pleased with the performance of the McLaren range within his portfolio, vying with other more famous brands in the lucrative but very competitive sports car segment — another best seller in the region.
At the top end, McLaren competes with the best in the sports car market, and its BP23 model sells at more than 10 million dirhams. “There are only 116 vehicles around the world and we have six of them. In that ultimate series sector, McLaren is dominating,” Al-Habtoor said.
Then there is Bugatti, the French super-sports car whose Chiron model is one of the most expensive seen on the UAE’s roads, selling at around 12 million dirhams. Last year, the company sold 12 of them, Al-Habtoor said, but any ideas that McLaren is competing with, and cannibalizing sales, of Bugatti were dismissed.
“That’s like comparing a normal plane with a UFO. I once drove a Bugatti on a track at over 200km and it was as if I was having a picnic in the garden — you don’t even feel it,” he said.
Occasional high-speed track driving, apparently, is one of the few occasions he likes to give the chauffeur a day off.